Tagged Questions

I am looking for an easy and well presented introduction to Black-Scholes theory and stochastic calculus aimed at undergraduate mathematics students. Please can you recommend a book?
How about Paul ...

I have two questions. I would prefer a reference if possible.
Is the value of vega bounded for $\sigma\in [0,\infty)$? (I assume so, I imagine it goes to 0 as $\sigma$ go to infinity.)
Are there any ...

I am unsuccessfully trying to find the Implied Volatilities for the SPX on a given date using information of the CBOE, as well as Open Interest, but as I run the code I am getting and error message ...

I am currently working through questions in Bjork's Arbitrage Theory in Continuous Time. However, I am unable to solve the following question, 7.2 in the book. A solution would be greatly appreciated.
...

I have been working on an old problem in one of my finance classes and, since no solution has been provided and I won't be able to contact my teacher anytime soon, I was hoping I could ask you guys to ...

I am trying to calculate the delta of an option at different strike prices where the underlying has a pronounced implied volatility skew in order to correctly hedge an options strategy.
Researching ...

If a trader shorts an option and dynamically delta hedges to ensure the delta is equal to 0 if that option expires out of the money does the trader profit that options extrinsic value at the time of ...

assume I have implied FX volatility Delta-Term table from broker. I have time noticed as 2M, 3M. what do I have to put into BS formula, is it 2/12 or "count the business days"/"daycount basis"?
I am ...

Assume the stock price follows a geometric Brownian motion Then in Black-Scholes pricing model, $N(d_2)$ is the risk-neutral probability that the option expires in-the-money. However, it is said that ...

If I assume that stock returns follow normal distribution with drift = 0% and S.D. = 10%.
In the long, if I keep investing in this stock for a year with the same capital every year for a consecutive ...

A standard example when learning to price American options is the perpetual American put. This is a put that has no expiry (or you can consider T = infinity). The standard solution prices this using ...

Let's assume the stock moves according to a classic Black-Scholes model, and makes a proportional jump with an unknown proportion. Say, it is either +1% or -3% of the stock value, and we know for sure ...

If i have negative yield (interest rate) can I still proceed with Standard Black and Scholes or Simple Binomial Model?
any Adjustment is required to the model?
how does it effect the pricing model in ...

When computing a single implied volatility value for a particular asset for use in cross sectional regression models, using daily end of day data. There are a few methodologies I've seen to used do ...

I have daily Close data of ODAX-options, obtained from ivolatility.com.
One third of the daily data shows premiums that are just above the inner value.
Even when inserting an implied vola of almost ...